Dynamic relationship between carbon price and coal price: perspective based on Detrended Cross-Correlation Analysis. (February 2019)

• Record Type: Journal Article
• Authors: Fan, Xinghua; Li, Xuxia; Yin, Jiuli
• Is Part Of: Energy procedia. Volume 158(2019)
• Page Start: 3470
• Page End: 3475
• Publication Date: 2019-02
• Subjects: cross-correlation -- carbon market -- energy market -- carbon price -- coal price; Power resources -- Congresses; Power resources -- Periodicals; Power resources; Conference proceedings; Periodicals; 333.7905
• DOI: 10.1016/j.egypro.2019.01.925
• Languages: English
• ISSNs: 1876-6102

Abstract

Abstract: Unlike the European Union market, the main driver of CO2 price in China seems to be coal price rather than oil and gas prices, considering the coal-dominant energy structure in this country. This study analyzes the interrelationship between coal and carbon prices in both time and time-scale interval perspectives by using the Detrended Cross-Correlation Analysis method. China's seven pilot carbon markets are taken as the sample. Results show a weak correlation between coal and carbon prices in short time scales (shorter than a quarter) but medium in long time scales (longer than a quarter). For short time scales, the correlation is negative in Chongqing and Shanghai, undetermined in Hubei, and positive for other pilots. For long time scales, Shenzhen pilot remains a negative correlation, Chongqing a positive while others a varying correlation. Results from rolling window method show a dominant weak cross-correlation during the development period of these pilot markets. However, the direction of correlation varies a lot during their developing periods both for the short and the long time scales except for Beijing market. Correlation is enhanced in Shenzhen but weakened in Hubei. In general, there exists a positive cross-correlation in Chinese carbon market and coal market. Such cross-correlation between coal and carbon prices is not usually seen in the European market. China's coal-dominant energy structure may be the reason behind this phenomenon.